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FTSE100 survey reveals overall deficit increase of nearly £5bn

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Pension consultants Barnett Waddingham’s annual survey of pension disclosures made by FTSE100 companies has revealed that despite making significant contributions and seeing falling long-term inflation expectations over 2014, many schemes have made little progress towards reducing deficits.

The overall deficit for the companies in the survey increased by nearly £5bn, as gains from contributions, asset returns and falling inflation expectations were more than offset by increases in liabilities caused by reductions in discount rates resulting from plummeting corporate bond yields. The survey, in its fourteenth year, focuses on the assumptions adopted by FTSE100 companies for determining the value of their pension liabilities for accounting purposes.

Martin Hooper, Associate, Barnett Waddingham said: “In many cases, particularly where the scheme has significant holdings of gilts, bonds or other liability hedging strategies in place, the damage to the balance sheet will have been tempered by the strong performance on the asset side. Although many schemes have retained significant shortfalls, overall funding levels are broadly comparable with 2013.”

Results from the survey also show: The average discount rate dropped by 0.9 percent to 3.6 percent p.a from 4.5 percent p.a in 2013. Average IAS19 funding level has remained consistent with 2013 at 89 percent, despite a significant drop in discount rates. The average RPI inflation assumption adopted by companies in the survey was 3.1 percent p.a. showing a decrease from 3.4 percent p.a. in 2013.

The average CPI assumption adopted as at 31 December 2014 was 2.1 percent p.a. (2013: 2.5 percent p.a.), around 1.0 percent p.a. lower than RPI – a slight increase on the 0.9 percent p.a. gap that was observed in 2013.The average real salary growth assumption was 0.1 percent p.a. in 2014, representing no overall change from 2013. The average life expectancy assumption increased by 0.1 years in 2014 demonstrating a small increase in the average life expectancy in 2014 of 23.3 years compared to 23.2 years in 2013 (based on a male aged 65 years). Business and IT leaders disagree on the future of data, according to new research from Rosslyn Analytics.

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